Target's Stock Outlook Stable Despite CEO Uncertainty, Says Morgan Stanley

Morgan Stanley has maintained an "overweight" rating for Target Corporation (TGT.US) with a target price of $112, acknowledging the short-term uncertainties that could impact the company's development. While the second quarter of 2025 saw overall good performance, the appointment of an internal chief executive officer has raised questions about the stability of Target's earnings base, as the market generally expects the company to undergo potential strategic and financial transformations.

Despite Morgan Stanley's anticipation that Michael Fiddelke, an internal candidate, would likely succeed Brian Cornell as the CEO, there is a divide among investors regarding whether Target will appoint an external candidate. Fiddelke's appointment as the head of Target's newly established Enterprise Acceleration Office may be seen as a signal that the company's core strategy will remain relatively stable.

However, Morgan Stanley believes that despite the low visibility of the future, the downside risk for Target's stock is relatively limited. Firstly, the company's business is gradually stabilizing, with the lower bound of the current fiscal year's earnings per share guidance at $7.00, providing a theoretical earnings floor. Secondly, even if Fiddelke opts for reinvestment, Morgan Stanley estimates that Target's earnings per share will not fall below $6.00. Thirdly, the real estate value, estimated to be at least $30 billion, provides some support against downside risks.

Regarding the controversy surrounding the change, Morgan Stanley suggests that the market expects Fiddelke to announce measures related to transformation, including supply chain optimization, improved marketing strategies, and enhanced product value. Establishing credibility through decisive changes in current strategies will be a crucial task for the newly appointed CEO.